Jamaica Savings Bank v. M. S. Investing Co. , 274 N.Y. 215 ( 1937 )

In this action to foreclose a mortgage upon real property judgment for a deficiency is demanded against the respondents who guaranteed payment of the mortgage debt. They allege in their answer that the time for payment of the mortgage was extended and that its terms were otherwise varied without their consent. Whether they are entitled as of right to a trial by jury of the issues of fact so raised is the question upon which we differ.

"The trial by jury in all cases in which it has been heretofore used shall remain inviolate forever." (N.Y. Const. art. I, § 2.) These words have been part of the fundamental law of the State since the adoption of the Constitution of 1821.

Prior to 1830 a decree for a deficiency could not be had in foreclosure. In that day an issue of personal liability for a mortgage debt was independently triable at law, that is to say, by jury. (Dunkley v. Van Buren, 3 Johns. Ch. 330; Jones v.Conde, 6 Johns. Ch. 77.) "This was an exception to the general rule, that where a court of equity obtains jurisdiction of an action it will retain it and administer full relief, both legal and equitable, so far as it pertains to the same transaction or the same subject-matter." (Frank v. Davis, 135 N.Y. 275,278.)

The law was changed in 1830 by the Revised Statutes. Since then only one action has been permitted at one time, except as the statute provides, for it forbids a suit in equity to foreclose the mortgage until the remedy at law, once resorted to, has been exhausted; and it forbids an action to recover the debt after foreclosure is begun, without leave of the court. (Reichert v.Stilwell, 172 N.Y. 83. So, Civ. Prac. Act, §§ 1077, 1078.) The Revised Statutes also authorized a personal judgment in a foreclosure suit, "not only against the mortgagor, as to whom equitable relief could be had, but also against any other person who was obligated for the payment of the same debt." (Frank v.Davis, supra, p. 278. So, Civ. Prac. Act, § 1083.) Nevertheless, the complaint in an action to foreclose a real property mortgage still states a single cause of action. Judgment for a deficiency is demanded, not as upon a separate count, but as "incidental" to the principal relief sought in rem. (Dudley v. Congregation of St. Francis, 138 N.Y. 451.) In this way, all the rights of the parties are submitted to the court in one action in equity.

It follows, so the court now holds, that since 1830 in this State no party in such an action has been entitled as of right to a jury trial of an issue of personal liability. Carroll v.Deimel (95 N.Y. 252) is said to commit us to that position and this seems to have been the view of learned commentators. It is my opinion that the court did not in that case attempt to go so far, common as the contrary impression may have been.

In Carroll v. Deimel the defendant mortgagor pleaded part payment. This court there said: "The defendant was not entitled as matter of right to a trial by jury. Although a sale of the mortgaged premises might result in a deficiency for which a money judgment could be docketed against the defendant liable for such a deficiency, such a judgment was not the sole object of the action, but was an incident of the equitable relief sought. It might not even become necessary, as the mortgaged premises might bring a sufficient sum to pay the mortgage debt, and the circumstance, that in the contingency of the premises proving insufficient, a judgment for the deficiency might result, did not entitle the defendant to a jury trial" (pp. 254, 255). This was correct as an answer to the contention there made by the defendant mortgagor that section 968 of the former Code of Civil Procedure (now Civil Practice Act, section 425) gave to him a statutory right to have the issue of fact tried by a jury as in "an action in which the complaint demands judgment for a sum of money only." The complaint in the action did not demand such a judgment. For that reason it was held that the application for a jury trial made pursuant to the statute was properly refused. No question of constitutional right to a jury trial was there raised or considered.

These respondents demand a trial by jury as their constitutional right in accordance with Civil Practice Act, section 429. It is thereby provided: "Where a party is entitled by the constitution, or by express provision of law, to a trial by jury, of one or more issues of fact in an action not specified in section four hundred and twenty-five of this act, he may apply upon notice to the court for an order directing all the questions arising upon those issues to be distinctly and plainly stated for trial accordingly. Upon the hearing of the application, the court must cause the issues, to the trial of which by a jury the party is entitled, to be distinctly and plainly stated. The subsequent proceedings are the same as where questions arising upon the issues are stated for trial by a jury, in a case, where neither party can, as of right, require such a trial; except that the finding of the jury upon such questions so stated is conclusive in the action unless the verdict is set aside, or a new trial is granted."

As guarantors of this mortgage debt, the respondents can suffer liability only for a deficiency that may result on the sale of the mortgaged premises. Prior to 1821, the trial by jury was used in an action against the guarantor of a mortgage debt to recover on his guaranty. The right to such a trial in that case was made fast by the foregoing constitutional mandate of that year. This mandate has never since been modified. The right thereby secured therefore remains inviolate, despite statutory changes meantime in the practice in foreclosure. (SeeSteck v. Colorado Fuel Iron Co., 142 N.Y. 236, 247.)

Knickerbocker Life Ins. Co. v. Nelson (8 Hun, 21) appears to be a decision to the contrary. If so, I think we are constrained to disapprove that case.

I vote to affirm the orders and to answer in the affirmative the questions certified.

HUBBS, FINCH and RIPPEY, JJ., concur with CRANE, Ch. J.; LOUGHRAN, J., dissents in opinion in which LEHMAN and O'BRIEN, JJ., concur.

Orders reversed, etc.